Lump Sum or Annuity: Which Should You Choose at Retirement?
Does your employer offer a traditional defined-benefit pension plan that guarantees you a monthly pension payment for life?
If so, congratulations are in order—such plans are becoming scarce these days. The trend toward 401(k)s, 403(b)s and other defined-contribution plans means that more and more workers must rely on their own savings and investments to supplement their retirement income.
However, with a defined-benefit plan, you’ll likely face a challenging choice at retirement: whether to take a qualified one-time lump-sum payout—which can be rolled over directly into a traditional IRA—or to receive a monthly annuity payment for the rest of your life or, in some cases, even longer.
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